This agreement allows the company to set its own rules on what should happen in the event of a dispute. Yes, for example. B, the employment of a director is terminated without contrary agreement, their participation is not affected as a rule. The director can then disrupt the transaction by imposing a veto on shareholder decisions or by deciding not to fulfill a director`s legal obligations. When a director is removed from his or her position, his or her employment may also continue. Because your managers have privileged access to your confidential information, intellectual property, client lists and technical information, you also need to ensure that this information is protected. You can also ensure that if a director leaves your company, his or her ability to work for a competitor is limited for at least a specified period of time. In the absence of an agreement, it can be difficult to remove the director of the company as quickly and easily as the company would like. This can lead to the use of a lot of time and resources to resolve potential disputes.
For example, a business manager working part-time in your company and for other companies or clients may be considered self-employed, although there are strict employment and tax rules that determine their exact employment status. Even if a director is not an employee of the company, but is, for example, a non-executive director, they need a service contract from a director to cover his non-executive duties. Business leaders are generally employed (but not always) by the companies they work for. As such, they are entitled to a written employment contract, just like the other members of the team. At the same time, if something goes wrong and the manager is evicted from the company by other business partners, the agreement may include a termination payment to ensure that the directors are properly compensated. Such an agreement can serve both the company and the directors, so that everyone benefits from having one. There is another good reason why you need service agreements for directors, and that is because your directors can have multiple roles within the company, as directors, shareholders and employees. If you don`t agree in advance about how the director would be treated if he left, it can be difficult and embarrassing to separate from the relationship when it becomes acidic. As part of good corporate governance, the service contract of your directors should clarify exactly what is expected of the director and, in particular, your expectations regarding decision-making and the need to act at all times in the best interests of the company. On the other hand, a non-executive director of a company is often independent, although you will still have to enter into a service contract with them to cover your tasks and obligations, while you are the director of your company. External investors want to see the director`s service contract as part of due diligence. The agreement would serve as an example of how business is well organized and would show how steps have been taken to ensure that the company is prepared to make emergencies.
As a general rule, an executive director is not independent, but an employee of the company. However, since the management of the company has certain obligations and responsibilities, both in general and under specific legislation, it is important that these are covered by a specific agreement, called a director`s service agreement. In addition to the basics you expect in an employment contract, a director`s service contract is more detailed and comprehensive because of his professional role and incriminating obligations.